Critique My Strategy (long)

sp0om said: "Well here it is. I usually wouldn't do this sort of thing, but I'm quite certain that there are holes in my strategy that I am not aware of. If you see anything incorrect in the assumptions I make about a good stock, please, by all means, speak up (I won't take anything personally). If you don't care to read through this entire post, you can skip right to the end where I included my watch list. So here goes. I start out by running a very basic stock screen with the PE ratios, PEG ratios, price book ratios, and strong growth. This is a very general stock screen I tweak every once in a while to narrow down the number of results I get, but the core of my stock screen revolves around the basic valuation ratios and earnings growth. After that, I filter through the stocks myself. I usually look for other factors I consider important, such as debt (this one is really make or break for me). If the enterprise value of the company is substantially higher than the market capitalization, I won't touch the company. I know that many financial companies can run a healthy business while assuming a huge amount of debt, but I won't touch any stock like that, even if the entire industry works that way (it just bugs me). Next is earnings and revenue growth. If the valuation ratios were fairly low, and the growth percentages are fairly high, I start to get more serious about adding the stock to my watch list. The next things I check are the institutional ownership, short percentage, and float/shares outstanding ratio. If the institutional ownership is greater than 30%, I feel better about the stock. If the short percentage is less than 10% I feel better about the stock, but the short percentage I use mainly as a make or break factor. If the short percentage is unusually high, and the rest seems ok, that is a red flag for me. The float/shares outstanding should be as close to one as possible. This isn't make or break, I just read somewhere that the more shares that are in the float, the less volatile the stock price. Also, if I'm not lazy, I go a step further and look at the competitors of the company to see if other companies are fairing better than the one I am looking at. If there is a company that is doing better, I stop looking at the first stock and move on to the better one. If the stock makes it through the filtering I do above, I then look at the chart. This is a make or break area. If the chart looks dead to me, no matter, how strong the fundamentals of the company are, I won't touch the stock. Well, there it is. The next area of research I want to look into is industry analysis. Looking into a strong industry and only selecting strong stocks from that group... Well, it's a work in progress. I also know I need to look more closely at business models, management, and future company developments, but that again is a work in progress. Here is my current watch list. If you see anything wrong with what I've chosen, please post why. I'd love to get second opinions on these. [color=red][i](DISCLAIMER: the following is my personal watch list. I do not own stock in any of the following companies and I am not encouraging anyone to buy into any of these stocks. Based on my criteria of stock picking, which I consider incomplete, it would be unwise to invest in these companies. These were found by doing very very unprofessional analysis and should not be considered for ownership without your own analysis. Kindly note, the stocks on this list do [u]NOT[/u] beat the market on a consistent basis.)[/i][/color] [b]KOMG OVTI FRX CECO AVID BWLD SPLS ATYT SYMC SHRP SKX PARL SWKS ASVI DWRI ATW BHP RIO BVN GFIG LCAV[/b]"

HappyHarry said: "Looks very sound to me. You look for stocks with good earnings growth you can buy at a discount. Over time, a strategy like that is bound to work. As long as you stay disciplined, and trade your own plan, you can make big money following that plan."

AlfredSokol said: "A screening process is great to help you turn up some real gems."

nemke said: "Looks like a valid procedure to me! Just a few addittions or suggestions to add to your comment: - Im assuming when you are talking about the chart and how dead or live it is you are talking about the volume. I personally believe, and correct me if im wrong, that "dead" volume can be a good thing and a bad thing. If the stock is new and the company is a solid company with good financials the volume will be low because the stock isn't popular yet. This does not mean that the stock is not a good pick, but quite the contrary, that it hasn't been discovered yet. Some books suggest to stay away from stocks that trade under the volume of 250,000. But i believe this depends on other circumstances. I think that low volume is sometimes a great opportunity. The other scenario could also be that the stock does not produce favorable results and thats why the volume is low, people aren't interested in it, in which case the company is no good."

chahinemm said: "i like the plan myself fairly similar to mine... the only thing i would consider adding is the product line itself... sometimes after this when you are down to maybe 10 stocks and look into the product of each u will see potential holes in the business model.. that usually will tell u to not go into it. but sometimes will strenghten your fundamentals and when u are going to invest in them u will be sure to stick to it for a long term... hope makes sense...but i like ur strategy and process a lot very clean and structured.... let us know how it improves over time and how it changes... and what success ration you have over time... chahine"

sp0om said: "I'll be working more on my strategy over the summer. The summer time seems to be when everyone else is taking a break, so I might as well too."

fivaxis said: "Are you looking at these for long term? Honestly I don't look to hard at that kind of stuff, but i'm trading on a fairly short term, usually around a couple weeks. I just look mostly at the chart (about a 5 week span) for stocks that are steadily going up with low volatility. Also I check stocks that have recently announced splits [url]http://aol.theonlineinvestor.com/split_center.phtml[/url]. I'm up 12% in the last week and a half with kwk, it's going steadily up but as soon as that changes it will hit my stop and I'll be looking for another stock. Of course I'm still learning but my last 3 trades were 3% gain, 1% loss, and so far 12% gain. When I first started I was looking more at long term, but I realized I don't have the paitience for that. I don't have enough capital for daytrading, but IMO that's a lot more tricky anyway so I kind of found the timespan that suits me well."

nemke said: "Purchasing companies that announced a split or a merger could be dangerous! I would advise against it but to each his own. ;)"

HappyHarry said: "Within seconds of most merger announcements, the price has already gapped up."

AlfredSokol said: "I like stock splits if you're looking for intermediate holds."